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New Currency Theory (NCT)


You just flat out don’t understand the accounting here. Sorry, but there’s just no nice way to say it. You need to ask more questions and take a basic accounting class because my explanations clearly aren’t helping.

For instance, when the govt deficit spends they create EXACTLY what you’re describing. They print a T-bill (a liability for the Treasury and an asset for the buyer) and spend it into someone’s account. Creating money in the manner you propose would result in the EXACT same accounting basics. We just wouldn’t call it “government debt” under your taxonomy. We’d call it govt spending or whatever you wanted.

In any case, no, we don’t agree that coins aren’t a liability. In fact, the US govt is specifically liable for replacing coins and cash that are damaged. It is their liability and their responsibility to redeem the coin when I want them to. This is why coins are listed as a Treasury liability on the Fed’s balance sheet. In any case, none of the semantics over that matter because the financial assets you want the Treasury to create would ABSOLUTELY, POSITIVELY, DEFINITIVELY be govt liabilities.

I’ve tried really hard to help you understand this stuff, but you keep insulting me and writing these passive aggressive comments that display a very basic misunderstanding of the facts. I would recommend an accounting course. That would help a lot.

Sorry I couldn’t be of more assistance....I tried.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

This is a good lesson in definitions.  The reason your balance sheet shows coins as a liability of the Treasury is because you are looking at the balance sheet after those coins have been paid for by the Fed.  Once the Treasury assigns the coins to the Fed for distribution, they become a liability of the Treasury owed to the Fed.  An asset is defined by who "owns" the coins.  Coins in the possession of the Fed are, by definition, the Fed's assets and the Treasury's liability.   A balance sheet is a static snapshot in time.   By definition, you can't have an asset appear on two balance sheets.

A T-bill is, at the time of creation, a liability of the Treasury.  The Treasury is liable to repay the bond purchaser.  A coin, on the other hand, is an asset of the Treasury at the time of creation - the Treasury is not liable to anyone at the point.  Once the Fed purchases those coins from the Treasury (the Mint), the Treasury then owes those coins to the Fed and it becomes a liability - but only after the Fed pays for them.

Your comment that coins are a liability of the Treasury because the Treasury is required to replace bad coins doesn't make them appear as a liability on a balance sheet.  It is the function of the Mint to replace bad coins, its an even swap.

You should reread your sentence where you claim a coin is a liability because the possessor is entitled to have those coins "redeemed".  Redeemed for what?  Are you now claiming that a coin is not real money and it needs to be redeemed for something to be used as a medium of exchange.  No, at T-bill needs to be redeemed for money but to claim money needs to be redeemed for money doesn't make sense to my uneducated brain.  Gives a whole new meaning to the word "redeem".

Sigh. Again.

Stop with the coin nonsense. No one is issuing trillions of coins or creating a coin based economy. It’s stupid.

So, in your “new” system the govt has to spend financial assets into existence. How would they do that? Well, the cleanest way is that they would operate as a consolidated version of the Fed/Tsy and spend deposits directly into people’s bank accounts. So, the govt wants to spend $100 to Paul. How does the accounting work on that? It looks like this

Paul’s Assets: $100

Govt liabilities: $100

The balance sheets balance. There’s no getting around that no matter how many silly word games you try to play with how coins are treated by various govt agencies.

Do you understand it now?

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

I usually don't like it when people respond in all caps but it seems you are only glossing over my response - so here it is in bold:

I am not advocating for a coin-based money system.  I've already said the system would use the same tokens we use now, coins, cash and mostly digital.  So please stop misrepresenting me here.  Thank you.

No, financial assets would not be "spent into existence", that is MMT double talk.

  1.  Like coins, money would be created initially and appear as an asset on the Treasury balance sheet - out of thin air, no loan or liability incurred.  ( Just like Lincoln did in 1862)
  2. Congress would  then appropriate and obligate that money to be spent - it exists first before being spent.
  3. Those assets would then disappear from the Treasury's balance sheet, just as what happens when a business buys capital equipment with some of its monetary assets.
  4. The recipients of that sovereign money would appear in the bank accounts of contractors and government workers.

Simple - straight forward - common sense.  No FOM, Fed Window, reserves, reserver requirement, blah blah blah

I want to reiterate - monetary assets disappear from a business's balance sheet when spent.


So, I called it spend and you called it “appropriate”. And what happens when the govt appropriate funds?  They debit their account and credit another account. What does this do? It transfers an asset from one balance sheet to another. It doesn’t make anything disappear. it doesn’t make anything go away. It transfers things from one balance sheet to another. And that asset NECESSARILY has a corresponding financial liability. But somehow you’re trying to claim that the household sector can have this new asset without a corresponding liability.  NO. It’s wrong.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

No - appropriation is not spending but that's quibbling.  The point is that the ASSET (in this particular example, coins) is created first and just sits on the Treasury's balance sheet as an asset UNTIL the Fed buys that asset and pays for it.  At that point the Treasury now does have a liability to the Fed to provide the coins in return.  Once the transfer is made, that asset is off the Treasury's books - the obligation to provide coins has been fulfilled.  The liability is gone.  Why would any record of these coins remain on the books?  They're gone.

I am only using coins as an example of asset-based money versus debt-based.

Your claim that an asset always has a counterbalancing liability is true UNTIL that liability is fulfilled.  IOU gets torn up.

I did NOT claim that a household can have this asset with no liability.  I claimed that the Treasury, because of the unique constitutional powers granted can create that asset out of thin air, owing nothing to anyone.  The business who receives that ASSET from the treasury DOES have a liability, unless it is a gift,  to provide the service that the government paid for.

Again, this is not fictitious pie-in-the-sky - Lincoln created ASSET money starting in 1862.

It is NOT equivalent to the government selling a T-bill in order to get money to spend.  That money is an asset but IS balanced by a liability. to the purchaser of the bond  It is a totally different situation.

As any good teacher says:


Please show the accounting steps showing that the govt would not have a corresponding liability when it “appropriates” funds. Do not use a coin based example. Thanks.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Lets be on the same page here.  Appropriations are just congress divvying up the budget - who gets what.  I think you mean spending.  I did NOT say congress does not have a corresponding liability when it spends.  Of course it does - it has a liability to pay for services rendered by a contractor or employee.  Once paid, that IOU, the government purchase order, is fulfilled - IOU is torn up, no liability any longer.  If the gov doesn't fulfill its obligation it gets penalized.

Is this what we are discussing??

I only used coins to point to how the system could operate - not how it does operate now.

Again, SHOW YOUR WORK. Stop with the word games and show an actual example of what you’re talking about. Show the accounting and payment transfers.  I don’t care what you call them. Just show the balance sheets. Thanks.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

US Treasury (Showing Coin entry on Balance Sheet)

Assets                                          Liabilities

$50M (coins)                               $0

  Net Position 



The seniorage from coins is balanced by Net Position which is equivalent to equity under Government Accounting Rules  (see FASAB Handbook)